Tuesday, April 13, 2010

4/13/10 - SPX EOD [10:30 PM Update Road to 1228 Continued]

http://waveprinciple.blogspot.com/2010/03/road-to-spx-1228.html[10:30 PM Update Road to 1228 Continued]

 SPX - 3/17/2010
SPX - 4/13/2010

I posted the top chart on 3/17/10 questioning where the market may head if it chose to climb higher. See post here. Well here we are today.

I think we are still heading towards 1228 albeit with a pullback in between. I adjusted the Fib retrace levels to reflect the changes in the structure since my last post.

If Minor A is complete or very close to completion, a Minor B wave pullback to 1140 would result in a an approximately 5% correction.




Well here it is. We are getting close to completing this leg up. Remember, there are still several options as to what this top will represent.

In summary these are the possible tops I am considering this to be:
1. P2 (or a Primary degree top)
2. Minor A of (Z) of P2 (or a Primary degree top)
3. Minute [iii] of Minor A or C of (Z) of P2 (or a Primary degree top)

But before we get there, let's look at what we're currently dealing with. The first chart above is the SPX 60 minute. The second chart is the SPX 5 minute chart for a closer look. The third chart represents the SPY Ending Diagonal.

On the 5 minute chart, I show that the market is tracing out micro waves [1] and [2] for subminuette iii of minuette (iii). If this count is correct, micro [2] dips down briefly tomorrow before it climbs higher to work on the meat of (iii). I show subminuette (iii) = 1.618*(i) at approximately 1215.

I have placed the alternate count labels that represent the Ending Diagonal scenario in gray. The third chart represents the SPY with the same Ending Diagonal scenario.

If the Ending Diagonal count is correct, I have subminuette a and b of minuette (v) tracing out. Subminuette b may need a little more work down just like [2] for the count option above, before a final subminuette c climbs higher to complete minuette (v). Minuette (v) cannot exceed the level represented by the Fib lines on the chart since wave 5 in ending diagonals cannot exceed wave 3s of that pattern. The equivalent level for the SPX would be 1212.89.

Both SPY and SPX levels assume that minuette (iv) completed for the Ending Diagonal option. Should price take out these levels, the ED option will be ruled out and my primary count will gain further strength.

I think by the end of this week we should have a very good clue.


  1. Yeah, I like it Grand. Good stuff.

    As for what this top will be in the bigger picture, I might be inclined to say option 3. I don't think it's the end of P2 because the market internals aren't showing the kind of weakness and large divergences that should be present at a major top.

    And with the strength in the market we may need to spend some more time creating divergences and seeing weakness in the RSI and other internals before even getting a B of (Z). Of course that will just kill the bears who can't hold off on shorting, or worse are still short from way below here. (ouch!)

    There's actually some serious underlying strength showing in this market right now, despite all the angst saying that creates in us bearish folks. :-] Just about the only thing that isn't strong is volume. But we all know that story in P2 by now.

    The biggest error (IMO) being made by the bearish crowd these days is looking at the "overbought" RSI and other indicators (but especially RSI) and thinking that it should mean a nasty correction, and soon. But they miss the fact that it is showing strength, and the market isn't likely to drop significantly until we have divergence AND the RSI 9 (what I primarily use) is under 70 or so as a guide.

    Another big mistake is seeing divergences over too large a time period for the given chart period (i.e. 5 min, 15 min, etc.) and/or not recognizing when the divergence has been "cleared" by a correction on that time scale. There are no clear black lines when applying these techniques but I see too many reaching for justification for a bearish bias and they're killing themselves by continuing to short a strong market.

    Thanks for your good work.

  2. Onlooker.

    Thanks for the thoughtful feedback and perspective. I hear you, if there is going to be any bias in the market, it should be in favor of the trend and at this point in time, that is up, plain and simple. Until the wave counts and MAs signal otherwise, we'll see how high we go.


  3. So everybody is (bears, that is) salivating over the prospects of a VIX sell signal right now, figuring that it's a sure thing and we're going to get a rip roaring pull back in the market.

    But what if it turns into a buy signal instead, by closing LOWER than the day that closed back inside the BBs? I fear that they will ignore this and cling to their bias, adding to shorts.

    I still think the market is too strong here to drop very much, despite the warning signals and "overbought" conditions. I think we've got another week or so before we make a short term top. Then maybe a few percent pullback before higher still.

    I don't know why, but that's what my work tells me. I'm gritting my teeth and holding off from going short.

    The dollar looked like it might make a (very) short term bottom going into today, but now it's looking like that may be delayed a week, which would coincide with the next trading cycle low according to Tim Wood's work (which I follow). And so gold will have another leg up before a significant correction, and stocks will grind higher.

    I'm long miners and a modest stock index position.

    Of course I might be wrong.